Exploration & Production | Production Rates | Capital Markets | Capital Expenditure

Canamax Energy Provides Operations Update

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   |    Wednesday,January 21,2015

Canamax Energy Ltd. has announced the following: 

• Preliminary capital expenditure plan for 2015
• Royalty Arrangement for funding of six well drilling program

Operations update

Given the current low commodity price environment, Canamax continues to focus on managing its capital and operating expenditures with the objective of maintaining a strong balance sheet. In addition, the Company continues to evaluate potential acquisition and consolidation opportunities as oil and gas companies become financially stressed.

Preliminary Capital Expenditure Program for 2015

Canamax's objective for 2015 is to set a preliminary, conservative capital budget, with a view to substantially maintaining the Company's existing production base. The preliminary budget has been set at $3.0 million (excluding carry-over from 2014 capital projects), comprised primarily of the Company's share of the six Royalty Wells at Flood noted below. The Company will monitor oil and natural gas prices and continue to periodically review its capital expenditures for fiscal 2015.

Royalty Arrangement

As part of Canamax's objective to conserve capital while maintaining its production base, the Company has recently entered into a Royalty Arrangement with Maple Leaf 2013 Oil & Gas Income Limited Partnership (Maple Leaf). Under terms of the Royalty Arrangement, Maple Leaf will fund $2.55 million of the capital cost to drill, complete and tie-in six vertical wells (the "Royalty Wells") at the Company's Flood property in exchange for a gross overriding royalty (GORR). This allows the Company to reduce its capital expenditures for the Royalty Wells and improve its rate of return on these wells.

Canamax is required to drill the Royalty Wells prior to September 30, 2015. Maple Leaf will initially receive a 20% GORR on production from the legal subdivision on which each Royalty Well is located, reducing to 10% once payout is achieved on Maple Leaf's investment. The GORR does not attach to any other production from the  Company's Flood property.

Operations Update

The Company's exit production rate at December 31, 2014 was in the 1,000 boe/d range (60% oil & NGL's) with an additional 350 - 400 boe/d of aggregate shut-in production at Flood and Wapiti. The shut-in wells at Flood were awaiting re-activation after being tied in to the Company's new gathering facilities during December. These wells have now been re-activated and put on production in mid-January. At Wapiti, the Company is currently completing the construction of tie-in facilities for the new horizontal, Cardium well completed in mid-December (production test results announced previously). This well is targeted to be on stream by March 1.

During the four-month period from September to December 2014, Canamax production averaged approximately 900 boe/d (56% oil & NGL's). This four-month period represents the Company's third and final fiscal period for 2014 as a result of the change to a December 31 year-end (from the previous February 28 year-end). The average production rate for the four-month period was negatively impacted by significant downtime for many of the Flood wells as they were being tied into the new gathering facility.